Yesterday eBay announced a plan to unload its enterpise business, eBay Enterprise, which just acquired from GSI Commerce four years ago for $2.4 billion. The U-turn movement shake everyone in business. According to the current CEO John Donahoe said, although eBay Enterprise runs a good business, it has increasely divergent oppurtunities and limited synergy with eBay. Separation will make both business units more focused in their respective priorities moving forward. What is behind this story?
EBay started a popular auction site in 1990s and had a face-to-face challege with its rival, Amazon.com in 2009-2010. In 2010, eBay earned $1.8 billion, dropping from $2.39 billion in 2009. To face Amazon's aggressive challenge, eBay bought GSI Commerce for $2.4 billion in 2011, expecting to bring more brand names to its marketplace ebay.com from GSI clients and provide Paypal payment solutions to them at the same time. EBay Enterprise has more than 1,000 clients of retailers and chain stores, providing additional services including omnichannel, store pickup, customer service, order fullfillment, etc. In 2014, eBay Enterprise contributed $1.2 billion revenue compared with $8.8 billion from marketplace and $7.9 billion from Paypal. We don't know what portion of $8.8 billion marketplace revenue was related to eBay Enterprise. Apparently, it is clear now that eBay Enterprise did not lift marketplace sale significantly, according to the company's release.
Year 2014 was a tough year for eBay, according to its CEO John Donahoe. Beside security breach and seo woe, eBay still has not yet changed its image of a cheap product market. Last two years, eBay changed to its strategy to list more auction listings in its Best Match. The result is when consumers searching keywords end up with many $0.01-plus-free-shipping auction listings in the first page, which cause a lot of bad buyer experience. This practice eventually causes eBay buyer profile change. As an eBay seller, we notice that there are a big increase of cheap product buyers in eBay buyer population. Items with normal online sale price of $10-$15 at our online store had a difficult time to be sold above $5. Therefore, to bring brand name retailers to eBay marketplace via eBay Enterprise may not be a smart movement under current situation. Apparently, there is a mismatch between the brandname's products and eBay buyers, which will limit eBay to grow revenue. That may explain why eBay want to spin off enterprise business.